Marathon bondholders signaled deal ahead of ConocoPhillips merger announcement

By Steve Gelsi

Investors were wading into Marathon debt amid 'who's next' speculation in the energy patch

Marathon Oil bonds were rallying Wednesday on the heels of the announcement of the company's $17.5 billion acquisition by ConocoPhillips, but investors had already been moving money into the energy company ahead of the deal.

Marathon Oil (MRO) on Wednesday agreed to be bought by ConocoPhillips (COP) in what could the last megadeal in the oil and gas space for the foreseeable future.

Marathon Oil bond prices gained more than 3 cents per dollar on Wednesday and were trading above par as investors anticipated the debt being paid off by ConocoPhillips.

Debt investors also appeared to be bullish on the benefits of the transaction to ConocoPhillips, as its bond prices moved up after the deal (see chart below).

Ahead of the deal, money had been flowing into Marathon Oil bonds as investors speculated that the company could be the next acquisition target after Hess Corp.'s (HES) $53 billion purchase by Chevron Corp. (CVX) and Exxon Mobil Corp.'s (XOM) acquisition of Pioneer Natural Resources.

Customer buys have outnumbered sells in Marathon Oil bonds by roughly two to one in the past two weeks.

Money has also flowed into ConocoPhillips bonds in the past two weeks (see chart below).

The move up in bond prices came along with a rally in Marathon Oil's stock on Wednesday as Wall Street cheered the deal.

Marathon Oil's stock rose nearly 20% as the top gainer in the S&P 500 SPX, while ConocoPhillips shares fell by 3%.

-Steve Gelsi

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05-30-24 1126ET

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